AFP, Istanbul :
Turkey’s new central bank governor vowed Sunday to tackle inflation in a bid to reassure the financial markets, which have been rocked by the sudden sacking of his predecessor.
A presidential decree late Friday announced that Naci Agbal, a market-friendly former finance minister, was being replaced with Sahap Kavcioglu, a former ruling party lawmaker.
No explanation for Agbal’s sacking was given, but the announcement came just a day after the central bank sharply raised the main interest rate to 19 percent.
That move, an effort to fight high inflation, had been welcomed by the markets.
But Turkish President Recep Tayyip Erdogan, an advocate of economic growth at all costs, is hostile to high interest rates, once describing them as “the mother and father of all evil”.
Analysts say the new central bank chief, an economist by training, subscribes to Erdogan’s unorthodox belief that higher interest rates cause inflation.
Most economists believe that higher interests rates slow inflation down by raising the cost of doing business.
But Kavcioglu argued in a column for the pro-government Yeni Safak newspaper last month that higher interest rates “indirectly” lead to higher inflation.
